Contractors fear retaliation if they try to recover shutdown costs

""After the DOGE actions to eviscerate USAID and pretty much punish many, many agencies and terminate thousands of contracts, I think the contractor community is tentative to actually enforce their rights," David Dixon, an attorney at Pillsbury Winthrop Shaw Pittman, said Thursday as part of the law firm's DC Disrupted webinar series. Dixon said this question he is getting from contractors reveals the depth of their anxiety: Will the government retaliate against me for simply asking to be reimbursed for costs caused by the shutdown?"

"Given this is not the first shutdown the market has experienced, the processes for recovering costs are-well established through administrative means such as "requests for equitable adjustment." Contractors use this process to seek compensation when government delays or changes increase their costs or extend timelines. "These are regular administrative functions that every contractor should be aware of and should be able to process," Dixon said. "Requesting an equitable adjustment should be a standard action that shouldn't cause retaliation at all.""

"But contractors are currently caught in a legal and operational vise created by the Anti-Deficiency Act, which prohibits agencies from spending money that hasn't been allocated. This means agency contracting officers cannot award new contracts, modify existing ones or exercise contract options. Dixon shared a story of a company that completed work for a Federal Supply Schedule renewal on the eve of the shutdown. The company was negotiating large orders with customers. But then the shutdown hit. The contracting officer could not exercise the option."

Government contractors face mounting costs, late payments, and operational chaos as the federal shutdown lengthens. Many contractors fear retaliation if they seek reimbursement for shutdown-related costs, making them hesitant to enforce legal rights. Administrative remedies such as requests for equitable adjustment enable contractors to seek compensation for government delays, changes, increased costs, or extended timelines. These administrative processes are standard functions that contractors should be able to use routinely. The Anti-Deficiency Act bars agencies from spending unallocated funds, preventing contracting officers from awarding new contracts, modifying existing agreements, or exercising contract options, which can leave contractors uncompensated.

Read at Nextgov.com